ISAS Working Papers

We begin this introductory section with a brief sketch of the South Asian background. The South Asian Association for Regional Cooperation (SAARC) is the largest regional organisation in the world, with India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives, Bhutan and Afghanistan (since 13 November 2005) as members, and with China,3 Japan, South Korea and the European Union granted observer status and distant prospects of Iran eventually becoming a member.4 The present eight member states have5 a combined population of 1.47 billion, compared to the world population of 6.56 billion in 2005. Had the SAARC been counted as a single political entity, it would have been the largest entity in the world, judged according to the population criterion. India with 1.12 billion (17.07 percent of world population), Pakistan with 165.8 million (2.53 percent of world population) and Bangladesh with 148.96 million (2.27 percent of world population) are among the ten most populous countries in the world. Interestingly, in 1907, the global population was estimated to be 1.7 billion and British India (India, Pakistan, Bangladesh and Myanmar)6 chipped in with 264 to 314 million. To come back to the point, the SAARC region is the 7th largest land area in the world. National gross domestic products (GDP) are in home currencies and, for comparison purposes, have to be converted into a common currency, the typical numeraire being the United States dollar. This conversion can be done using the official exchange rate7 or purchasing power parity (PPP), the latter incorporating the idea that non-tradeables like services are relatively cheaper in developing countries and relatively more expensive in developed countries and conversions must take this into account for a fair comparison to be made. In PPP terms, the overall SAARC GDP was US$4,074 billion in 2005, making the SAARC the third largest economic entity in the world, after the United States and China